Three of the largest specialist insurers listed on the London stock market today revealed they lost or made barely any money on their financial investments in 2008.

Hiscox and Brit Insurance saw profits halved as Chaucer Holdings swung into the red for the first time since 2001.

The devastating impact of very low or even negative investment returns highlights the growing fears across the City about the potential weakness of the balance sheets of much larger, general insurers such as Prudential, Aviva and Legal & General.

They have seen their share prices tumble in the past few weeks as analysts fear they need to raise billions to shore up their finances. They have also been under prolonged attack from hedge funds who have successfully sold their shares short.

Dane Douetil, chief executive of Brit and one of the most respected figures in the Lloyd's of London insurance market, said: "2008 saw a massive destruction in global shareholder wealth. In the insurance industry, these effects were most apparent in investment returns where mark to market valuation reduced insurers' investment returns to around zero."

In fact Brit's investment return tumbled from 5.42% or £137.4 million in 2007 to just 0.16% or £7.4 million last year. That left pre-tax profits down by 53% at £89.2 million.

Brit is moving its headquarters and tax base from London, where it sponsors the Oval cricket ground, to the Netherlands.

At Hiscox, the £1 billion Bermuda-based specialist insurer, the investment return swung from a positive 5.4% to a negative 1.3%.

That meant a gain of £101 million in 2007 turned into a loss of £28 million in 2008. This, in turn, dragged down pre-tax profits by 56% to £105 million.

"The worldwide financial collapse stress tested our investment portfolio beyond any expert forecast and a very small investment loss was a fair result," declared chairman Robert Hiscox.

Chaucer, the smallest of the three, saw pre-tax profits of £89.4 million in 2007 swing to losses of £26.2 million last year as its investment portfolio fell by £71 million. The previous year it had investment gains of £41.7 million.